Monday, March 18

Thinking About Home Improvement? What Do You Need to Know? Tips for Saving Money and Avoiding Rip-Offs


In the spring, a homeowner’s thoughts turn naturally to home improvement. As sure as the flowers bloom, however, the thoughts of home improvement service providers—the good, the not-so-good, and the scamsters—turn to selling their services and wares to homeowners. How do you get the improvements you plan done right and at the right price? No matter the type and size of your project, from a “simple” paint job or roof repair to a home expansion, knowing how to define your project, find the appropriate financing if necessary, and locate and evaluate the appropriate products and contractors is a must. This report covers those basics step by step.

First, research your project and budget

What’s the scope of your project? The more you know about what your specific home improvement project entails, the more ably you can evaluate appropriate products and proposed services. This tip holds true for something as “simple” as interior painting and re-carpeting all the way to planning an extensive remodel or expansion to your home.

Even if you don’t know the business end of a hammer from the handle, researching the basics required for most products isn’t hard. You’ll find multiple reputable websites that cover most types of home improvement projects. For some recommendations, see our Online Resources for Homeowners. Here are some questions and points you’ll wish to cover.

  • What’s the scope of the project? What are the typical elements involved? What are best installation or construction practices?
  • Will the project require a designer in addition to a contractor? Is the project typically done just by working with an experienced contractor? Can you do it yourself, if you so desire?
  • What are the available product options? Compare quality, functionality and typical prices. What are best installation practices?
  • Will a building permit be required? You don’t have to get the permit nor should you, but knowing the answer helps you evaluate potential general and specialist contractors. A call to your local building permit office is all that is usually required.
  • What are the estimated cost ranges for your project? This information may be harder to find and your estimation may be rough, but it can help you plan. Be sure to include materials costs, permit fees, typical design, installation or contractors fees. Add at least a 10% contingency fee. Finally, remember this is a very rough estimate just to help you think about the scope of the project.

Shop your financing before shopping for contractors or service providers

Larger projects such as remodeling baths, kitchens, basements, or outdoor patios/decks or adding an extension typically require a loan. Before you interview potential contractors, compare loan options and terms from at least two financial institutions such as a credit union and bank. Although many remodeling contractors may offer financing directly or through a lender they recommend, such loan offers usually cost more and some may have very unfavorable terms. We recommend that you finance with an independent source. If you want to compare terms, get any financing contract offer in writing, but don’t sign anything.

For smaller projects such as installing new carpet, bathroom fixtures, or kitchen appliances, many people typically put such costs on a credit card or choose the retailer’s/installer’s financing options without comparing costs. This can be a mistake. Comparing your options can save you big money. Many “tied-in” retail financing offers (i.e. “90 days same as cash” or “Just open up our credit account and save 10%”) often result in paying higher financing costs. Check all the terms and compare those to terms on your credit card or talk to your financial institution about other financing options they offer.

Find the best service or contractor for the project

Finding a skilled, responsible specialty contractor for a single project (such as painting, roofing, flooring or tiling) or general contractor for a major remodel may be the most important key to a successful project. These steps can help.

  • Get a recommendation or referral. If you’ve worked previously with a good contractor, go to them again. Also ask friends, family, co-workers, and neighbors to recommend contractors they have used who did a good job. It is helpful to know if someone didn't like the work a contractor did as well. Some neighborhood associations maintain a list of contractors and repair services that members recommend. If you have to use listing services (print or online) or the yellow pages, remember that reputable contractors will certainly appear in those listings but they can’t tell you the contractor’s track record or quality of their work.
  • Check out the contactor’s track record. Select the three to five contractors you might like to ask for estimates. Check each out with the Better Business Bureau (or local/state equivalent) or your local or state consumer affairs office. No record of complaints doesn't mean there haven't been any problems for a particular business; it may mean that problems may not have been reported or that the contractor is doing business under several names. Also determine how long the contractor has been in business and if the business has a permanent address. A longer track record and permanent address tend to represent stability.
  • Select at least three contractors to talk to personally. A face-to-face meeting at the job site is best. Look for these things.

    • Are you able to talk with the contractor easily?
    • Ask if the contractor will do the job himself/herself or subcontract it out. Subcontracting for a single job such as painting, roofing, or small structural repair is a red flag. General contractors for a major remodel will typically subcontract parts of the job to specific trades such as electricians, plumbers, tile installers, etc.
    • Ask the contractor for customer references, particularly those customers who recently had a similar job done. If they won’t give you references, cross them off your list. Ask the references the following questions:

      • Were you satisfied?
      • Was the job completed on time?
      • Were you kept informed about the job status and any problems?
      • Were there any unexpected costs? Why and for what?
      • Did the workers show up on time? Did they clean up when finished?
      • Would you recommend the contractor?
      • Would you use them again?
      • If it is a remodeling job, can I come see the work?
  • Check the contractor’s credentials. Ask to see current licenses and insurance certificates. Licensing requirements vary widely from state to state. Most states require electrical and plumbing contractors to be licensed. State licensing requirements for other contractors can vary; check your state's requirement at The contractor should carry personal liability, worker's compensation, and property damage insurance.
  • Get written estimates from more than one contractor. Make sure that all of the estimates are based on the same specifications or “scope of work.” If a contractor wants to deviate from the specifications, have them write those changes up as options.

Know the red flags of home improvement scams and/or contractors to avoid


Refuse to use the services of any person or company who:

  • Solicits business door-to-door. A reputable business doesn't need to go door-to-door. Many print flyers stuffed in your door/mail box or bulk mailed may also come from less than reputable companies—if you are tempted, check the company out thoroughly.
  • Wants payment in cash. Never pay in cash—keep a paper trail.
  • Wants the entire payment up front. Or wants you to pay for the materials up front or establish an account at a building materials supplier that they can charge to.
  • Pressures you to “sign today” to get a discount or offers you discounts for finding other customers.
  • Requests that you get the necessary permits. This could mean that the contractor is not licensed or registered as required. Or the contractor may shrug off the need for a permit; if you’ve checked earlier, you’ll know if this is a lie or ignorance.
  • Is not listed in the local telephone directory or does not have a local street address (not P.O. Box). Even small free-lance repair contractors who are established in your area but have no "office" will usually give you their home address.
  • Needs an answer immediately. Don't sign a contract until you have reviewed it thoroughly.
  • Offers exceptionally long guarantees.
  • Wants you to borrow money from a lender they know. This request often signals a home improvement loan scam.

Seal the deal in writing and keep an eye on the work

Be sure the contractor you select provides a written contract. The contract should contain a detailed description of the work and materials to be used, the costs and payment terms, the starting and completion dates, and all the contractor’s responsibilities. The contract should include all guarantees, warranties and promises or these should be provided separately in writing. Make sure you read the contract carefully. For larger projects, have your lawyer check the contract.

Once the job starts, don’t be an absentee homeowner. Keep a regular eye on the work. If you have questions, ask them. If something doesn’t seem quite right, inquire about it. Be tactful and polite, but be clear. After all, it’s your home and your money.

Knowledge is power!

When it comes to repairing or remodeling your home, this old saying has never been truer. It may be a drag or hassle to educate yourself about the renovations you’re considering for your home and to take the time to check out multiple contractors. But putting yourself in the position to pick and work with the right contractor as a knowledgeable consumer can save you many more hassles and headaches during the project.

For more information

See our Homeowner’s Guide for more resources.

From the FTC, Hiring a Contractor and Home Improvement.

The Consumer Reports Home Improvement Guide contains some good articles and ratings of appliances but requires a subscription to access some of the material.

The U.S. Department of Housing and Urban Development website’s pages on home improvement provide information about the various loan programs that HUD offers for home improvement and who and what kinds of projects qualify.